WellPoint reported that fourth-quarter 2013 earnings fell nearly 68 percent on higher costs related to the sale of its contact lens business, but revenues rose on increased use of medical services towards the end of the year.
And despite difficulties with the rollout of the state and federal health insurance exchanges, the insurer said that enrollment is ahead of projections.
As of last week, WellPoint, the nation's second largest insurer, had received 500,000 applications for individual coverage on the public marketplaces, as activity grew from Thanksgiving through a spike at the end of the year, said CEO Joseph Swedish in an earnings call with reporters and analysts.
"We anticipate another increase in applications in March ahead of the enrollment deadline," he said.
Although the insurer does not have the information breaking down whether applicants were previously uninsured or not, "we know that 80 percent of those were not previously insured by WellPoint," Swedish noted. The insurer is still receiving enrollment data from exchanges and premiums from applicants for coverage that took effect Jan. 1.
"While it is early, we are encouraged by the level of applications that we have received and the indicators that profile our risk pool," he said.
WellPoint, which sells Blue Cross Blue Shield plans primarily under the Anthem and Empire banners, reported that fourth-quarter 2013 net income dropped to $148.2 million, or 49 cents a share, from $464 million, or $1.51 a share in the year-ago period, which included a favorable tax settlement. The company was hit by an impairment charge for diminishing value on the pending sale of its 1-800-CONTACTS business.
High utilization was "prompted by some members seeking services prior to the potential changes in coverage in 2014," as some plans were being cancelled, Swedish noted on the call.
Operating revenue rose 16.3 percent to $17.6 billion in the fourth quarter from $15.2 billion previously with full inclusion of Amerigroup and positive results in the commercial segment.
"We are encouraged by the trajectory of our membership, as we grew sequentially during the fourth quarter and expect to add over a million new customers in 2014," Swedish said in the earnings release.
The insurer's benefit-expense ratio, or medical loss ratio – the portion of premiums used for patient care – was 87.8 percent compared to 87.3 percent the previous year. That was due to higher individual utilization in the commercial and specialty segment ahead of Affordable Care Act implementation in January, the earnings report said.
Membership grew a net of 145,000, or 0.4 percent, on gains in local group business and California Medicaid, with declines in national and individual businesses.
The company reaffirmed its recent forecast for at least $8.00 a share for all of 2014 and $73 billion in operating revenue, Swedish said.
For the full year, the second-largest insurer reported net income was $2.5 billion, or $8.20 a share, compared to $2.7 billion, or $8.18 a share, in 2013.